Business Context and Reporting Period
First Internet Bancorp (INBK) filed this Form 8-K on May 3, 2023, to update its financial results for the first quarter ended March 31, 2023. The filing addresses a material impairment related to a commercial and industrial participation loan and provides updated liquidity and deposit data as of April 30, 2023.
Key Financial Metrics
- Net Loss: $3.0 million for Q1 2023 (after additional charge-off).
- Diluted Loss Per Share: $0.33.
- Shareholders' Equity: $355.6 million (GAAP); $350.9 million (Tangible).
- Book Value Per Share: $39.76 (GAAP); $39.23 (Tangible).
- Capital Ratios: Total equity to assets at 7.53%; Tangible common equity to tangible assets at 7.44%.
- Deposits: $3.8 billion as of April 30, 2023.
- Liquidity: Cash and unused borrowing capacity represent 159% of adjusted uninsured deposits.
- Loans to Deposits Ratio: 95.5% as of April 30, 2023.
- Credit Quality: Nonperforming loans to loans at 0.26%; Nonperforming assets to total assets at 0.19%.
Material Changes vs. Prior Period
The primary material change is an additional partial charge-off of $2.2 million regarding a single commercial and industrial participation loan. This brings the total impairment for the loan to $6.9 million, inclusive of a previously announced $4.7 million charge-off. Consequently, the company reported a net loss for the quarter, contrasting with prior expectations before the full extent of the impairment was known. Deposit balances increased by $182.2 million (5.0%) from March 31 to April 30, 2023.
Outlook, Risks, and Management Commentary
Management expects to receive payment for the remaining balance of the impaired participation loan during May 2023 and does not anticipate future cash expenditures related to this specific impairment. The company reaffirms its financial strength, noting no unusual deposit outflows through May 3, 2023, and sound credit quality aside from the noted charge-off. Risks cited include general economic conditions, interest rate impacts, credit quality, and operational system failures.
Investor Verification Checklist
- Verify the final payoff amount and timing for the commercial and industrial participation loan.
- Confirm the stability of deposit balances beyond the April 30, 2023 date.
- Review the reconciliation of non-GAAP tangible equity measures to GAAP standards.
- Monitor the loans to deposits ratio trend as it declined from 99.6% to 95.5%.